If your employer provides you with some basic group term life insurance, there's a good chance you will have the option to buy additional group term life insurance. This option is called supplemental group term life insurance but it might also be called voluntary group term life insurance. Let's look at 6 key features that most of these plans have.
1. It's Employee-Paid Group Term Life Insurance
Supplemental term life insurance is an employee-paid benefit. If you want to pick up additional coverage for you or for your family, the premiums are paid 100% by you through payroll deduction.
2. It's Normally Guaranteed Issue At Initial Enrollment
Usually you can buy up to a certain amount of life insurance without having to provide evidence of insurability. The amount of life insurance provided without medical questions will vary from employer to employer.
If you have any medical conditions, it's a good opportunity to get life insurance without having to qualify for it. Don't miss the initial enrollment. Otherwise, with most plans, you will have to answer medical questions at later enrollments and can be turned because of health at that time.
Some plans allow you to increase without medical questions at later enrollments if you get less than the guaranteed issue limit at the initial enrollment.
If you don't have any medical problems, you can opt for coverage above the guaranteed issue.
3. Rates Are Likely To Increase As You Get Older
Many of the supplemental group term life plans I've seen are attained age plans that have five year age bands. With attained age plans, your rates will go up as you get older. At older ages you might get priced out of the plan.
I know I have offered issue age plans that keep you in the same age bracket from the age you signed up, but that's not the norm in the marketplace.
You'll want to find out what rate structure your employer's plan has. If it's issue age, that's a huge plus for you down the road especially if you are younger (assuming the employer never changes the plan and you stay with the employer).
4. Dependent coverage may be available
Coverage for your spouse and dependents may also be available on a guaranteed issue basis. In order to get coverage on your family, you will probably have to buy coverage for yourself first.
5. Amount of Life Insurance Still Probably Reduces At Older Ages
Like basic group life insurance, supplemental group term life insurance will also begin to reduce as you reach older ages. Most supplemental plans have a life insurance age reduction calculation built in to them just like the basic group term life insurance does.
6. Portability And Conversion May Be An Option If You Leave Employment
If you leave your employer, many supplement plans today do have some portability. This means you can keep your coverage after employment. Keep in mind that that doesn't mean coverage will necessarily last your whole life. The life insurance will still expire at some point.
Your rates might also change slightly if it's a portable term plan and go up significantly if you convert it to a whole life policy. I talk more about conversion and portability here.
Conclusion
Supplemental group term life insurance is a great option to have at your employer. But, it's no substitute for also having your own personal life insurance that you own and control. I talk more about some of the drawbacks to group term life insurance in this article.
Let me know if you have any questions about supplemental group term life insurance in the comments.
Here's a video I did awhile back on supplemental group term life insurance too.
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